CASE STUDY: Has Beef Quality Grade Declined?INTRODUCTION
The common interpretation of USDA USDA,
n.pr See United States Department of Agriculture. QG data suggests that QG within the US beef supply declined dramatically over the last 20 yr. The common inference (logic) inference - The logical process by which new facts are derived from known facts by the application of inference rules.
See also symbolic inference, type inference. is that the apparent decline in percentage of Choice grade beef has resulted in a 36% increase in the percentage of Select grade beef, which has resulted in a shift downward in overall beef quality (Hughes, 2002). The continuing trend toward value-based marketing and relatively high Choice-Select price spreads, coupled with reports of declining QG, have caused beef producers to be concerned that value is being lost through production of lower quality product.
National Beef Quality Audit data published or presented for 1991, 1995, 2000, and 2005 (Lorenzen et al., 1993; Boleman et al., 1998; McKenna et al., 2002; NCBA NCBA National Cattlemen's Beef Association
NCBA North Carolina Bar Association
NCBA National Cooperative Business Association
NCBA North Carolina Biomedical Association
NCBA National College of Business and Arts , 2005) demonstrates a variation in the proportions of cattle grading Choice and Select, but an identifiable trend toward reduced QG has not been reported. This is in dramatic contrast to the common interpretation based on USDA grading proportion data, which would suggest that the proportion of Choice carcasses declined from 79 to 57.2% over the same time span. One explanation for this discrepancy DISCREPANCY. A difference between one thing and another, between one writing and another; a variance. (q.v.)
2. Discrepancies are material and immaterial. is that historical USDA data are most often expressed as the proportion of carcasses in a particular grade vs. the number of carcasses graded, rather than as a proportion of total production. The primary objective of this review was to quantify Quantify - A performance analysis tool from Pure Software. historical trends in Choice and Select beef supply based on yearly kilograms of federally inspected product rather than the standard method based on the percentage of carcasses grading Choice of carcasses graded. This approach allows for a more consistent comparison of historical trends with respect to increases in total number of carcasses graded and historical increases in carcass carcass, carcase
1. the body of an animal killed for meat. The head, the legs below the knees and hocks, the tail, the skin and most of the viscera are removed. The kidneys are left in and in most instances the body is split down the middle through the sternum and the vertebral weight. A secondary objective of this review was to explore the short-term Short-term
Any investments with a maturity of one year or less.
1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. demand structures for Choice and Select products.
MATERIALS AND METHODS
Historical Quality Grade Data
Annual data from 1938 to 2005 were acquired from USDA (2006a), and included kilograms of federally graded Choice and Select product, kilograms of federally inspected beef, and percent of carcasses grading Choice and Select.
Quality grade data (e.g., percentage of Choice) are typically expressed as a proportion of graded carcasses; however, the proportion of total carcasses graded over time has varied. To resolve this distortion distortion, in electronics, undesired change in an electric signal waveform as it passes from the input to the output of some system or device. In an audio system, distortion results in poor reproduction of recorded or transmitted sound. , the amount (kilograms produced) of Choice product and the amount of Select product were expressed as proportions of the amount of all federally inspected beef, rather than as proportions of the product graded.
The time span from 1938 to 1965 was considered representative of "historical" grading standards. Beginning in 1965, carcasses were required to be ribbed rib
a. One of a series of long curved bones occurring in 12 pairs in humans and extending from the spine to or toward the sternum.
b. A similar bone in most vertebrates.
2. between the 12th and 13th rib for grading. Prior to 1965, QG was assigned as·sign
tr.v. as·signed, as·sign·ing, as·signs
1. To set apart for a particular purpose; designate: assigned a day for the inspection.
2. on the basis of external fat cover (USDA, 1997). The second interval considered was 1965 to 1975. In 1975, muscle conformation con·for·ma·tion
One of the spatial arrangements of atoms in a molecule that can come about through free rotation of the atoms about a single chemical bond. was removed as a factor influencing QG because it was unrelated to palatability palatability (pal´t (USDA, 1997). Additionally, QG and YG were decoupled as grading factors. The third time span considered was 1975 to 1987. In 1987 the Select grade replaced the Good grade (USDA, 1997). The fourth time span considered was 1987 to 1997, because of the increased marbling marbling, in bookbinding, a process of coloring the sides, edges, or end papers of a book in a design that suggests the veins and mottles of marble. In tree marbling, as of tree calf bindings, the design suggests also the trunk and branches of a tree. requirement to achieve Choice grade for B maturity carcasses (USDA, 1997). In addition, 1997 closely corresponded to the escalation es·ca·late
v. es·ca·lat·ed, es·ca·lat·ing, es·ca·lates
To increase, enlarge, or intensify: escalated the hostilities in the Persian Gulf.
v.intr. in formula- and gridbased (i.e., carcass pricing) marketing (Cattle Fax, 2007). The final time span considered was 1997 to 2005, to capture recent changes in supply dynamics. The timeline
Timeline may refer to:
Demographic Data for Product Availability
Increases in total beef output over long time spans may be related to population increases. Therefore, total production of federally inspected and graded beef was coupled with historical data for US population data (US Census Bureau Noun 1. Census Bureau - the bureau of the Commerce Department responsible for taking the census; provides demographic information and analyses about the population of the United States
Bureau of the Census , 2000) to express the quantity of Choice or Select product available per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. . This expression dampens the effects of both an expanding total red meat production and an expanding US population over the time period studied, and provides an estimate of the amount of product available to a consumer.
Short Run Supply and Demand Data
Daily supply and demand data were recorded for a 52-wk period (i.e., May 25, 2006, to May 26, 2007) to provide a short-run perspective of total product demand. Daily data were obtained from the USDA Agricultural Marketing Service The Agricultural Marketing Service (AMS) is a division of the United States Department of Agriculture, and has programs in six commodity areas: cotton, dairy, fruit and vegetable, livestock and seed, poultry, and tobacco. Carcass Equivalent Index (Report No. NW_LS410; USDA, 2006c) and the National Daily Cattle and Beef Summary (Report LM_ XB403; USDA, 2006b). Data collected from the carcass price equivalent index report included the daily price paid for live cattle grading Choice and Select (supply) and daily box beef price for Choice and Select product (demand). Data collected from the National Daily Cattle and Beef Summary Report included Choice and Select daily load count (1 load = 18,181 kg boxed beef boxed beef
the alternative to carcass meat. Major cuts, often deboned, are packed in sealed plastic bags and packed in strong cardboard boxes. equivalent). The daily boxed beef price for Choice and Select product was then multiplied mul·ti·ply 1
v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies
1. To increase the amount, number, or degree of.
2. Mathematics To perform multiplication on. by the daily Choice and Select load count to calculate revenue demand in total dollars. Daily data were aggregated into weekly averages for calculations.
The relative product demand ratio was calculated to evaluate the value of additional Choice and Select product, and elasticity estimates were calculated to determine demand sensitivity in relation to price. The relative product demand ratio was calculated as the average weekly percentage change in the individual product category (i.e., Choice and Select) demand value divided by the average weekly percentage change in total demand value as follows: relative demand ratio = % change in product $ value demand/% change in total $ demand.
Demand elasticity was calculated as the percentage change in average weekly load count divided by the percentage change in average weekly load price, multiplied by average weekly load price divided by average weekly load count as follows: demand elasticity = (% change in load count/% change in load price) × (average load price/average load count).
Data were analyzed an·a·lyze
tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es
1. To examine methodically by separating into parts and studying their interrelations.
2. Chemistry To make a chemical analysis of.
3. as time-series data using a linear regression Linear regression
A statistical technique for fitting a straight line to a set of data points. model including first- (linear), second- (quadratic quadratic, mathematical expression of the second degree in one or more unknowns (see polynomial). The general quadratic in one unknown has the form ax2+bx+c, where a, b, and c are constants and x is the variable. ) and third-order (cubic) effects of time. The linear regression model included annual kilograms of graded Choice and Select product. Initial analyses were conducted across the entire time span of the data set, and subsequent analyses were conducted across shorter time spans in an attempt to resolve trends within more discrete time Discrete time is non-continuous time. Sampling at non-continuous times results in discrete-time samples. For example, a newspaper may report the price of crude oil once every 24 hours. periods. A separate analysis was conducted to determine the correlation coefficient Correlation Coefficient
A measure that determines the degree to which two variable's movements are associated.
The correlation coefficient is calculated as: between the proportion of Choice product as a percentage of total graded products and kilograms of total graded product from 1987 to 2005.
RESULTS AND DISCUSSION
Historical Trends in Quality Grade
Figure 2 depicts several expressions of the proportion of Choice product from 1938 to 2005. The solid line expresses the proportion of Choice product as a percentage of graded beef, not as a proportion of the total beef produced. This proportion reached a peak in 1986 at nearly 94%. From 1987 to 2005, the proportion of Choice product expressed as a percentage of graded product is inverse (mathematics) inverse - Given a function, f : D -> C, a function g : C -> D is called a left inverse for f if for all d in D, g (f d) = d and a right inverse if, for all c in C, f (g c) = c and an inverse if both conditions hold. to the proportion of product actually graded (r = -0.87; P < 0.01). In addition, during World War II, the large requirements for food products by the armed forces caused an escalation in the grading of beef because federal specifications required that all beef purchased for federal programs be graded. During this time, the proportion of Choice carcasses declined precipitously pre·cip·i·tous
1. Resembling a precipice; extremely steep. See Synonyms at steep1.
2. Having several precipices: a precipitous bluff.
3. . Correspondingly, in 1987 the proportion of the total slaughter slaughter
1. the killing of animals for the preparation of meat for human consumption. Many methods are used. See also emergency slaughter, captive bolt pistol, carbon dioxide anesthesia, jewish slaughter, muslim slaughter, pithing, puntilla, shechita, sikh slaughter.
2. that was actually graded also increased, presumably pre·sum·a·ble
That can be presumed or taken for granted; reasonable as a supposition: presumable causes of the disaster. because of the reclassification Reclassification
The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of "Good" as "Select" and an increase in the marketability Marketability
A negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold.
The ease with which an investment may be bought and sold in the secondary market. of this product. A decline in the percentage Choice of carcasses graded was observed. This effect was most likely due to dilution Dilution
A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities.
Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. by increasing the denominator denominator
the bottom line of a fraction; the base population on which population rates such as birth and death rates are calculated.
denominator in the calculation of proportion (number of carcasses graded), and was not necessarily indicative of a change in the numerator numerator
the upper part of a fraction.
see additive genetic relationship.
numerator Epidemiology The upper part of a fraction (the number of carcasses grading Choice).
When the proportion of Choice product was expressed as a percentage of the total federally inspected slaughter, the apparent decline from 1986 to 1996 was eliminated. Therefore, many of the dynamics in the proportion of Choice beef previously reported (i.e., apparent reductions in the "quality" of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. beef supply) are a function of the change in the amount of product graded. This is likely because of a change in the incentives of producers and processors to grade a larger number of cattle, rather than presenting for grading only those that were most likely to grade Choice. Expression as a percentage of the total beef supply provides a more consistent basis of evaluation when grading is a voluntary action (Figure 3). The proportion of Select ("Good" before 1987) beef was low and declining until 1987. This suggests that producers elected to grade only cattle that were likely to grade Choice until an incentive (e.g., enhanced marketability of "Select"; increasing opportunities for valuebased marketing) caused a greater proportion of the total supply to be presented for grading.
Trends in Choice and Select Beef Output
Annual Choice beef production (kilograms of Choice beef produced) is shown in Figure 4. From 1938 to 2005, there were significant (P < 0.01) linear and quadratic effects of time on the amount of Choice beef produced. Over this time span, the amount of Choice product increased (positive linear coefficient coefficient /co·ef·fi·cient/ (ko?ah-fish´int)
1. an expression of the change or effect produced by variation in certain factors, or of the ratio between two different quantities.
2. ) at a decreasing rate (negative quadratic coefficient). This is a different perspective when compared with the proportion of Choice product as a percentage of graded beef, which suggests that beef QG has declined over the same time span.
Annual Good-Select beef production is also shown in Figure 4. From 1938 to 2005 there were significant (P < 0.01) linear, quadratic, and cubic effects of time on the amount of Good-Select beef produced. The cubic effect was a result of a relatively stable product volume from 1938 to 1986, followed by a rapid escalation until 2000, followed by another period of apparent stability. The large increase in Select output during the late 1980s and 1990s does not appear to be offset by reductions in Choice production during the same time span, suggesting that the increase in Select graded product was a result of grading more cattle, not a result of declining overall marbling in the population.
Dynamics in Product Availability
The overall increases in production of both Choice and Select product over time have occurred at a time of population growth in the United States. Therefore, the amounts of Choice and Select product produced per capita (scaled to the population) are indicators of consumer availability of these product categories over time (Figure 5). It is important to note that this is not equivalent to an expression of consumption, but rather an expression of the availability of product in the marketplace. Consumption would be the per capita production value adjusted for net beef exports and stocks or storage, and would vary from these values.
From 1938 to 2005 there were linear, quadratic, and cubic (P < 0.01) effects of time on the amount of Choice and Select beef available per capita. Over this time span, availability of both Choice and Select product increased, although the dynamics and timing of the increases are dissimilar. There were no (P > 0.19) effects observed for Choice product availability from 1938 to 1965, although kilograms of Choice product available to consumers increased from the period low of 0.8 kg/person in 1940 to the period high of 18.1 kg/person in 1965. The only exception to this annual increase was a decline in 1947 to 1.0 kg/person. The average amount of Choice beef available to consumers during this time span was 7.6 kg with a CV of 79.8% (if the time trends are ignored). The lack of regression regression, in psychology: see defense mechanism.
In statistics, a process for determining a line or curve that best represents the general trend of a data set. effects was a result of the variation in per capita Choice output in the 1940s and early 1950s. There were linear (P < 0.01), quadratic (P = 0.01), and cubic (P = 0.04) effects observed for Select product availability from 1938 to 1965 as the amount of Select product available to consumers increased from a period low of 0.6 kg in 1939 to a period high of 9.0 kg in 1945. From that point, Select product availability declined annually to 3.8 kg in 1965. The average amount of Select beef available during this period (4.3 kg/ capita) was less than the amount of Choice beef available (7.6 kg/capita). This decline in Select availability from 1945 to 1965, in the face of expanding total beef availability over the same time frame, reflects the low incentive to present cattle for grading that were not highly likely to grade Choice.
Choice product availability increased linearly (P - 0.03) from 1965 to 1975. The amount of Choice product available per consumer steadily increased from 1965 to a period high of 24.8 kg in 1970, but then declined to a period low of 16.9 kg in 1975. The linear effect is positive; the last year observed in this period (1975) exhibited a sharp decline in product availability, but this decline lasted only one year. The average amount of Choice beef available during this period was almost 3-fold greater than the previous period (22.0 kg annually) with a CV of 11.8%, a substantial reduction in variability compared with the first period evaluated. There were no (P - 0.22) effects observed for Select availability from 1965 to 1975, as the amount of Select product per person remained fairly consistent with a period high of 4.1 kg in 1966 to a period low of 2.8 kg in 1975. The average amount of available Select beef during this period was slightly less than the previous time span at 3.7 kg annually.
Between 1975 and 1987, there were linear (P = 0.04) and quadratic (P = 0.05) effects on Choice availability over time. The amount of available Choice product increased from a period low of 16.9 kg/capita in 1975 to a period high of 24.2 kg/capita in 1978, but declined somewhat through 1987. The average amount of Choice beef available to the consumer during this period was similar to the previous period at 21.6 kg yearly, with a CV of 10.8%. The percentage decline in Choice output (2.1%) across this period was much less than the intraperiod variation. There were linear, quadratic, and cubic (P < 0.01) effects observed for available Select beef from 1975 to 1987. Consistent with the amount of Select beef produced during this period, Select beef availability steadily declined from a period high of 2.8 kg in 1975 to a period low of 0.5 kg in 1987. The average amount of available Select beef during this period was also the least historically at 1.2 kg annually.
There was a linear (P = 0.03) and a tendency for a quadratic (P 0.09) effect observed for available Choice beef from 1987 to 1997, as the amount of Choice beef available decreased slightly throughout this period. The statistical significance of this low magnitude of change is a result of reduced variability in product availability, and thus a more sensitive test of the trend. Initially, there was a slight decline from the period high of 21.6 kg in 1988 to 18.1 kg in 1991, but availability subsequently stabilized sta·bi·lize
v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es
1. To make stable or steadfast.
2. with an average of 19.2 kg of available Choice beef during this time span. The dynamic in per capita output corresponds closely with the national cow herd inventory during this time period. A reduction in intraperiod CV to 7.2% is evidence of some stabilization Stabilization
The action undertakes a country when it buys and sells its own currency to protect its exchange value.
Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders in availability compared with previous periods. There were quadratic and cubic (P = 0.02) effects observed for available Select beef from 1987 to 1997. From the historical low of 0.5 kg in 1987, available Select product increased steadily to a period high of 12.1 kg in 1997. Over this period, the average amount of available Select product increased nearly 7-fold to 6.4 kg annually.
There were no (P = 0.21) effects observed for the amount of Choice beef available to consumers from 1997 to 2005. The available amount numerically nu·mer·i·cal also nu·mer·ic
1. Of or relating to a number or series of numbers: numerical order.
2. Designating number or a number: a numerical symbol. declined from a period high of 19.7 kg in 1998 to the period low of 17.1 kg in 2004. The average amount of available Choice beef throughout this time span was 3.3% less than the previous period, at 18.6 kg annually with a CV of 5.5%. Similar to the results for Choice, there were no (P = 0.15) regression effects observed for the amount of Select beef available to consumers from 1997 to 2005. Also similar to Choice beef availability, available Select product declined numerically from a period high of 13.2 kg in 2000 to a low of 11.6 kg in 2004. Although numerical numerical
expressed in numbers, i.e. Arabic numerals of 0 to 9 inclusive.
a numerical code is used to indicate the words, or other alphabetical signals, intended. declines were observed within both product categories, together (i.e., available Choice and available Select) this period represents the largest amount of total beef available to consumers. The intraperiod decline of available product within each product category was likely a result of the reduction in cattle inventory witnessed during this period.
These data suggest that the addition of the Select grade dramatically expanded the availability of that product to consumers without negatively affecting the availability of Choice product. Effectively, a new category of graded beef was created, as was the intention of creating the Select grade. The consumer availability data consistently reflect the results presented for the total amount of graded beef produced annually, suggesting that the production of graded beef has adjusted with changes in consumer demand.
Short Run Demand Structure for Choice and Select Beef
The relative product demand ratio shown in Table 1 suggests that for every one unit increase in total product demand, Choice product value increased by 1.62 units and Select product value increased by 0.16 units. Thus, weekly changes in total beef demand are more heavily influenced by changes in Choice product demand.
Demand elasticity measures the relationship between changes in quantity demanded and changes in its price, and is useful in predicting changes in quantity demanded given shifts in price (Nicholson, 2005). Values approaching zero indicate inelastic inelastic
Of or relating to the demand for a good or service when quantity purchased varies little in response to price changes in the good or service. demand whereas values approaching -1 indicate elastic elastic
Of or relating to the demand for a good or service when the quantity purchased varies significantly in response to price changes in the good or service. demand (Nicholson, 2005). The Choice demand elasticity (-0.39; Table 1) suggests that there was limited change in the weekly quantity demanded for Choice product at any given price level. As weekly supply of Select product shifts, and subsequently new price points are discovered, there is a more dramatic impact on the quantity of Select beef demanded (elasticity of -0.90). Collectively, the overall (i.e., Choice and Select) product demand is intermediate at -0.65.
In the short term, demand for Choice product is relatively more inelastic whereas the demand for Se- lect product is relatively more elastic in nature (Figure 6) . As the weekly supply of total graded product varies and pricing points are discovered for each product category, the amount of Choice product demanded re- re- word element [L.], back; again; contrary, etc.
1. Again; anew: rebreathing.
2. Backward; back: recurvation. mains relatively constant. As supply tightens, the price of either category would be expected to increase. This price increase would have minimum impact on the amount of Choice product sold, but would have a larger impact on the volume of Select product sold. When total product supply increases and price is reduced within both product segments, a greater relative reduction in the price of Choice beef compared with Select beef would be expected. This, coupled with a limited impact on the quantity of Choice product demand- ed (inelastic), could dampen in- creases in total expenditures for beef if the increase in supply is driven by a substantial increase in Choice product availability. Alternatively, a stable supply of Choice product provides for short-term stability in overall beef price. Perhaps this is a possible explanation for the stability in Choice supply witnessed over the last 2 time periods (1987 to 1997 and 1997 to 2005) discussed earlier. The discrepancy in elasticity among the 2 categories also suggests that Choice and Select are not necessarily strong substitutes. As supply tightens, the same amount of Choice is demanded, although at a much greater price. However, as prices increase, the quantity of Select product demanded diminishes more rapidly, suggesting that consumers may substitute with non-beef products. Additionally, the relatively more inelastic demand schedule observed for Choice product may provide an alternative view of why dramatic changes in the ChoiceSelect spread are observed over a short period of time. The steeper or more vertical elasticity slope calculated for Choice product would suggest that a small change in the weekly supply of Choice beef translates into a larger change in the price of Choice product and thus a shift in the Choice-Select spread. Figure 7 shows that during the 52-wk period used to calculate the demand elasticities, the Choice-Select spread ranged from a weekly high of $23.08 (June 9, 2006) to a weekly low of $6.61 (February 9, 2007). When the weekly Choice-Select high occurred (June 9, 2006), 62% of the total graded carcasses were Choice, whereas during the weekly low (February 9, 2007), 68% graded Choice. In the first quarter of 2008, the weight of carcasses did not adjust according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. historical seasonal patterns, and a relatively high proportion of this product graded Choice (i.e., the supply of Choice product escalated). During this same period, the Choice-Select price spread diminished di·min·ish
v. di·min·ished, di·min·ish·ing, di·min·ish·es
a. To make smaller or less or to cause to appear so.
b. to as low as $0.31/45.4 kg (USDA, 2006b).
There is little evidence that the increase in Select beef output has been the result of declining amounts of Choice beef produced. Increases in amount of Select beef produced result from increases in the proportion of beef presented for grading. An increase in the proportion of beef graded is likely due to enhanced marketing options available and increases in value-based pricing Value-Based Pricing
A pricing strategy in which a product's price is actively dependant upon its demand.
This method of pricing allows companies to take advantage of highly demanded products by charging more. structures. Historical Choice beef production as a proportion of graded product does not account for the expansion of total graded carcasses. Choice percentages previously reported reflect a lack of incentive to present all carcasses for grading, not the overall quality of beef produced.
The recent stabilization in slaughter mix suggests an optimum is being approached. Evaluation of short-run demand structure supports this premise, and suggests Choice and Select products are not substitutes. It is difficult to support the hypothesis that beef quality has been declining, or that the mix of slaughter cattle is decidedly nonoptimal. Evidence also exists that rapid escalation of the production of Choice beef removes market premiums for this product and may dampen total expenditures for beef.
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